InvestMacro Forex News

Article by Investment U

You should be able to do better than the Philippines ETF (NYSE: EPHE) if you can pick the companies growing revenue and profits the fastest.

Last week, a crack reporter for a leading investment newspaper asked me the following question:

“What’s the economic significance/implication of a country having a young population?”

I had to think quite a bit before responding. You often read about the connection between demography and investing. Gurus like Harry Dent focus almost exclusively on demographic trends to make their market calls.

In brief, here’s my take on how a youthful population can affect the potential for economic growth of a country. More importantly for investors, what companies will likely prosper with this demographic wind at their back?

• Younger people are just at the beginning of their consumer and investor life cycle – great fuel for upward growth of consumer spending in many areas over a long period of time.

• A younger population means lower healthcare and other government retirement benefits – greatly relieving pressure on national budgets.

• Younger people get married and have kids – this means a population growth spurt – a key part of the formula for economic growth and a sign of confidence in the future.

But I caution that having a youthful population is far from an automatic success formula. A country needs to have basic institutions in place, such as rule of law and an independent judiciary, good primary education and an open market economy.

Need proof? Many of the poorest countries in the world have a young population, but are mired in war, political instability and corruption. Mali, for example, has 47% of its population under the age of 14.

Growing Faster

It’s interesting though to see that younger countries do seem to be growing faster. I don’t want to bury you in numbers, but let me give you some data points.

While America has 20% of its population under the age of 14, the Philippines tops the list at 34.6%. For Peru, it’s 28.5%, Columbia 26.7%, India 27.3%, Mexico 28.2% and Vietnam 25.2%. For China, it’s a surprising low of 17.6%, and Russia comes in at only 15.2%.

On the other side of the equation, the percentage of citizens over the age of 65 is highest in Japan at 22.9%, while it’s 13% in America, 6.6% in Mexico, 6% in Indonesia, 5.5% in Vietnam and only 4.3% in the Philippines.

The Philippines looks like a clear winner on both ends of the age game.

But the critical question for investors is to think through what areas will benefit most from these demographic trends. A growing population and families at the beginning of their consumer life cycle means higher demand for things like food, drugs, consumer banking services like mortgages, cellphones, oil and energy, waste management, autos and motorcycles, construction and housing.

The Republic of the Philippines

As an example, let’s take a look at the winner of the demographic derby, the Republic of the Philippines. For some time, the Philippines, a country of 100 million, has been a bit of a laggard in Asia, though lately its prospects are brightening. The country is now a net creditor and its budget deficit has dropped to 2% of its GDP. Infrastructure is improving and the political situation seems to stabilizing, and the Philippines’ banking system is the healthiest in Southeast Asia.

All this good news has sparked Manila’s stock market. It was the world’s seventh-best performer in 2011 and, so far in 2012, the Philippines ETF (NYSE: EPHE) is up 25.9%.

You should be able to do better than this basket of stocks if you can pick the companies growing revenue and profits the fastest. Some may think that stock picking is an afterthought after identifying a promising trend or market, but it’s by far the most important decision.

For the Philippines, here’s the challenge: there’s only one Philippine stock trading on the NYSE – Philippine Long Distance (NYSE: PHI). And while it offers a nice dividend, the stock seems rather expensive to me and growth is slowing.

There are also 12 “pink-sheet blue-chip” Philippine stocks that trade over the counter, but the liquidity for them is very poor.

If you have a brokerage account that allows you to invest in the Philippine market though, here are a few companies I like in particular:

• San Miguel Corp. (OTC: SMGBF.PK), which is not only the dominant (founded in 1890) brewer in the Philippines and many parts of Asia, but is active in food, beverages, power, mining and banking. Drinking beer (before graduating to fine wine or a martini) seems a perfect fit with youthful population.

• Another good match is SM Investments Corp. (OCT: SVTMF.PK). Founded in 1960, the company is at the sweet spot of shopping mall development, retail, financial services, real estate development and tourism, hotels and conventions businesses in the Philippines. During the first quarter, revenue was up 16% and net income up 13% year over year. SM Investments is the top holding (8.2%) of EPHE.

For many of you, EPHE is the best fit, but don’t forget your trailing sell stop since there can always be some profit-taking from time to time.

Good Investing,

Carl Delfeld

Article by Investment U

London Gold Market Report
from Adrian Ash
BullionVault
Thurs 10 May, 08:25 EST

WHOLESALE MARKET prices to buy gold and silver repeated yesterday’s rally in London trade after a slight drop Thursday morning, rising back above $1594 and $29.30 per ounce respectively as platinum and palladium also stemmed this week’s sharp drops.

“Technically, many [precious metals] are now oversold,” says a note from dealers Intl FC Stone, pointing to chart analysis and noting that gold trading volume on the Globex futures platform was 40% above the last month’s quiet average on both Tuesday and Wednesday.

“The [price] drop was large and quick, Bloomberg quotes analyst Xiang Nan at CITICS Futures Co., calling a rebound in Asia’s wholesale demand to buy gold overnight “not surprising.

“But the Dollar looks to be strong in the near term and this will limit gains.”

Thursday morning saw the US Dollar creep back from its near-2012 highs vs the Euro, while major-economy government bonds also slipped in price, nudging yields higher from yesterday’s historic lows.

Asian stock markets fell however for the fifth session in a row on Thursday, despite news of a turnaround in China’s balance of trade to a surplus of $18.4 billion in April.

Crude oil extended its drop to 9 days on the run, the longest stretch since early 2009. European stock markets rallied around lunchtime in London, after giving back all of an early rise.

“We doubt whether effective demand by households and firms in the US and the UK today is being boosted materially by 10-year Treasuries being at [historic low yields],” says a new paper from Citigroup economist – and former Bank of England policymaker – Willem Buiter, co-authored with Ebrahim Rahbari.

“[It’s time for] reducing rates all the way to zero” across the US, Euro, Japan and UK they advise, “carrying out more imaginative forms of quantitative easing and credit easing…[and] engaging in helicopter money drops: a combined fiscal monetary stimulus.”

The Bank of England voted today to keep UK interest rates at a record low of 0.5% for the 38th month in succession. It also left its “quantitative easing” program of government-bond purchases unchanged at £325 billion – equal to almost one-third of all gilts currently in issue.

Sterling pushed up to fresh 3-and-a-half year highs versus the Euro currency. Prices to buy gold in British Pounds held near 9-month lows beneath £985 per ounce.

Gold priced in Euros recovered from Wednesday’s 4-month low at €39,200 per kilo.

Shorter-term, howerver, prices to buy gold “continued their melt-down” on Wednesday, says the latest technical analysis from bullion bank Scotia Mocatta, pointing to the sharp recovery from yesterday’s 4-month low.

“[That] 1585 level was also our initial downside target on this move,” says Scotia. “A close below this critical support level will open up a full retracement to 1522. Topside resistance is at 1612, the previous interim low.”

Strong demand to buy gold “will likely require continued deterioration in Europe or in the United States,” says Goldman Sachs’ updated gold price forecast today.

Restating Goldman’s 2012 target of $1840 per ounce on average, “The case for higher gold prices remains in place,” says team leader Jeff Currie, calling gold a “currency of last resort” and warning that June will prove a key period because of US Federal Reserve decisions, European political summits, and a possible re-run of last week’s indecisive Greek election.

“If Greece decides not to stay in the Eurozone, we cannot force Greece,” said Germany’s finance minister Wolfgang Schaeuble at a conference Wednesday/.

“There is no alternative to the agreed consolidation program if Greece wants to remain a member of the euro zone,” said his former deputy – and current European Central Bank member – Jorg Asmussen to the Handelsblatt newspaper.

China’s $440 billion sovereign wealth fund China Investment Corp. has suspended new purchases of Eurozone government debt, its president Gao Xiqing said in an interview Thursday.

“What is happening in Europe right now is of course of concern,” Gao said. “We still have our people looking at opportunities in Europe, even though we don’t want to buy any government bonds.”

Adrian Ash
BullionVault

Gold price chart, no delay   |   Buy gold online at live prices

Adrian Ash is head of research at BullionVault, the secure, low-cost gold and silver market for private investors online, where you can buy gold today vaulted in Zurich on $3 spreads and 0.8% dealing fees.

(c) BullionVault 2012

Please Note: This article is to inform your thinking, not lead it. Only you can decide the best place for your money, and any decision you make will put your money at risk. Information or data included here may have already been overtaken by events – and must be verified elsewhere – should you choose to act on it.

Article by Investment U

It’s not going to last forever, but copper prices are expected to climb at least until 2015.

Forget about gold and oil prices for the moment…

Instead, you should focus your attention on another commodity that has flat-out outshined them both in recent years in terms of price.

I’m talking about copper. That’s right.

Since May 2009, copper prices have exploded nearly 200% while oil and gold prices have “only” ticked up about 70%.

And this epic run isn’t over yet… not by a long shot.

That’s because, even after falling from its all-time highs earlier this year, demand for copper is still growing over four times the rate it’s being produced…

The Copper Crunch

Today, copper is used in everything from construction to electronics to transportation to manufacturing and more.

In fact, many experts refer to it as “Dr. Copper,” stating it has a Ph.D. in economics, as it oftentimes can gauge the overall state of the global economy.

Most recently though, there were two main reasons why copper prices backed off from their record highs:

1. Inventory: As you can see below, copper inventories (much of it China’s) have flooded the markets since mid-September 2011…

2. China: China accounts for just about 40% of world copper demand. In the first three months of 2012, its economy grew at its slowest pace in nearly three years. Less industry in China means less demand for copper. So copper prices slid lower.

But like I said, this dip is only temporary.

To see why, we’ll need to take a closer look at the supply side of copper.

Remember… It’s All About Supply and Demand

According to CRU Group, the copper market deficit will hit 500,000 metric tons in 2012.

Yet this shortage isn’t coming because of increasing demand. It’s happening because there just isn’t enough copper to go around.

The world’s top four listed global copper miners – Freeport McMoRan (NYSE: FCX), BHP Billiton (NYSE: BHP), Xstrata (LSE: XTA) and Rio Tinto (NYSE: RIO) – saw their copper outputs drop recently between 10% and 18%.

Just to keep up with current contracts, Codelco, the world’s leading copper miner, was forced to buy copper from an outside source earlier this year. What’s more, the copper mining industry has undershot production expectations by an annual average of 5% over the past seven years.

I wouldn’t be surprised to see this trend continue, especially as more and more good economic news comes out of the United States.

How to Play the Copper Supply Shortage

It’s not going to last forever, but copper prices are expected to climb at least until 2015. That’s when analysts say there will be enough new mines in production to match demand.

Until then, one of the easiest ways to invest in this price increase is through iPath Dow Jones UBS Copper Total Return Sub-Index ETN (NYSE: JJC), which tracks the price of copper futures on the COMEX.

Just be sure to always use trailing stops and never put more than 1% of your total portfolio into any stock investment.

Good Investing,

Mike Kapsch

Article by Investment U

By TraderVox.com

Tradervox (Dublin) – The euro has been under pressure all week as traders seek express concerns over the fate of Greece in the trading bloc and other political sentiments from the region. The dollar and the yen have enjoyed most of the fears in the market with demand for safe haven currencies emerging. The pound has kept its grounds against the dollar losing only marginally over the week. The trend this week has been bullish for the dollar and yen while pound and euro has been majorly bearish. Let us see what next week holds for the major currencies.

EUR/USD: this pair is set to close the week lower than psychologically significant 1.30 level. If the euro/dollar pair closes the weak below 1.30, then we are likely to see this pair breaking the uptrend support during in the coming week especially if the industrial Production data to be released on May 14 does not generate positive sentiments for the euro. Another report that will affect this pair is the Gross Domestic Product report for Germany which is expected on Monday 15. The outlook for the EUR/USD pair in the coming week remains bearish where we might see a break of the uptrend support.

GBP/USD: this pair has been under pressure following concerns in the British economy. The BOE meeting decision expected to be released today has kept the pair on the low. Trade Balance and Goods Trade Balance report to be released in UK on Monday are the major reports that will determine how the pair will open the week. The pair is expected to remain at mid 1.61 through next week and we have a neutral outlook for the pair.

USD /CHF: the cross has been moving downwards as traders choose the Swiss franc over the dollar as the better haven. Producer and Import Prices report to be released on Sunday May 14 in Switzerland will have a bearing on how the pair opens the week. We have a bearish outlook on this cross positive reports for the Swiss Franc and demand for safe haven currencies are expected to push the cross downward.

USD/JPY: the demand for safe haven is expected to keep this cross under pressure. However, BOJ is keen on keeping the pair above 80-level mark. Domestic Corporate Goods Price Index to be released on May 13 will determine how the pair opens next week. We remain neutral on this pair over the course of next week.

Disclaimer
Tradervox.com is not giving advice nor is qualified or licensed to provide financial advice. You must seek guidance from your personal advisors before acting on this information. While we try to ensure that all of the information provided on this website is kept up-to-date and accurate we accept no responsibility for any use made of the information provided. Opinions expressed at Tradervox.com are those of the individual authors and do not necessarily represent the opinion of Tradervox.com or its management. 

Article provided by TraderVox.com
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News and analysis are produced throughout the day by our in-house staff.
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By The Sizemore Letter

In looking at two companies in the same sector, would you prefer to have a stock that pays a 2.7% dividend or one that pays a 3.1% dividend?

The answer might seem obvious at first; all else equal, who wouldn’t take the higher cash payout? But before you answer, take a look at Figure 1.

Figure 1

This chart shows the quarterly dividend of the two companies I mentioned above, both major U.S. retailers.  You will immediately notice that one company, “Company A,” has done a much better job than the other of raising its dividend over the past decade and particularly in the last few years.

Company A is the lower yielding of the two, with a current dividend yield of 2.7%.  But should it continue to raise its dividend in the years ahead, investors would realize a much higher cash payout over time despite the slightly lower yield today.

So, let me ask again, dear reader: Would you prefer to have a stock that pays a 2.7% dividend or one that pays a 3.1% dividend?

I’m sure you know what my answer is, and you probably agree.  You will probably agree even more when you find out what the two companies in question are: Company A is megaretailer Wal-Mart (NYSE:$WMT) and Company B is beleaguered electronics chain Best Buy (NYSE:$BBY).

In my last article, I warned investors not to “chase” high dividend yields.

You have chosen wisely.

And while I would hardly call buying a stock that yields 3.2% “chasing” a high yield, the core lesson is the same.  When building a solid, long-term income portfolio, you cannot make your investment decisions based on current yield alone.  Doing so puts you at multiple risks, all of which can be devastating to you long-term investment goals.

I’ll start with the obvious: business risk.  An exceptionally high current yield often means that investors have sold off the stock or bond due to real, fundamental problems with the business. It also often means that the market is discounting a cut to the dividend.

Does this mean that you should always avoid exceptionally high yielders?

Of course not.  Often times the market overreacts and gives us contrarian value investors fantastic opportunities to be greedy when others are fearful.  You have to look at each case individually and make a judgment call.  To give a recent example, I believe that the potential returns far outweigh the risks in Spanish telecom giant Telefonica (NYSE:$TEF), despite the risks implied by its 11% current yield.  There may be short-term turbulence in Europe, but the company’s long-term future is very bright.

I would be far less enthusiastic about, say, Teekay Tankers (NYSE:$TNK), which yields 9.8%.  The oil tanker business is extremely cyclical and subject to booms and busts.  And given the cut-throat competitiveness of the business, longer-term dividend growth (or even dividend maintenance) is by no means certain.

The second reason to focus on dividend growth is protection from the ravages of inflation.  I have no doubt in my mind that Wal-Mart will continue to prosper. Most of what it sells is merchandise that consumers are unlikely to buy online due to convenience and timing issues.  (On a personal note, most of my Wal-Mart purchases are spontaneous and based on immediate needs.  Where else do you buy a Rubbermaid trashcan, a can of paint, or a case of Dr. Pepper at 3:00 am?)

Wal-Mart’s dividend should easily beat inflation in the years ahead, which is critical for retirees that depend on dividends to meet their current living expenses.

I can’t say the same for Best Buy.  While the company is the last man standing among major big-box electronics chains, it is getting hit from two sides.  Shoppers tend to use the stores as a showroom to try out new electronics before whipping out their smartphones to order them online for far cheaper.  And for larger items no usually purchased online—such as home appliances—Best Buy will continue to see tepid growth for as long as the housing market remains depressed.

Best Buy would not appear to be at risk of failure in the immediate future, but investors searching for steady dividend growth should look elsewhere.

Disclosures: WMT and TEF are holdings in the Sizemore Capital Dividend Growth Portfolio.

Charles Lewis Sizemore, CFA, is the editor of the Sizemore Investment Letter, and the chief investment officer of investments firm Sizemore Capital Management. Sign up for a FREE copy of his new special report: “Top 3 ETFs for Dividend-Hungry Investors.”

Article by Investment U

Below I’ll show you a more affordable way to play Apple’s expected growth, but first let me show you why I’m so confident in the stock…

Apple (Nasdaq: AAPL) let us know last Tuesday that once again the company knocked it out the park.

It had an unbelievable second quarter in 2012, largely due to strong iPhone sales – again.

Analysts last month tried to read between the lines on earnings reports from Verizon (NYSE: VZ) and AT&T (NYSE: T), and figured there would be lower iPhones unit sales. The stock got pretty beat up for week. However, Apple showed that iPhone distribution isn’t a two-trick pony.

I’m certainly bullish on Apple, but I also don’t want to tie up all the money it takes to acquire shares in the $600-range. Below I’ll show you a more affordable way to play Apple’s expected growth, but first let me show you why I’m so confident in the stock…

$1,000 By 2014?

Let’s start with earnings. Expectations were $10.07 per share, and Apple went above and beyond with $12.30 in earnings on $39.2 billion in revenue. And if you haven’t heard, the second quarter is usually Apple’s worst. Yet, Apple delivered its second-best quarter in history – with last quarter being the best.

Apple’s first quarter this year raised the bar on results both in terms of revenue levels and gross margin. According to Forbes’ Darcy Travlos, this year’s first quarter was the highest gross margin quarter at 44.7%, only to be bested this quarter by a gross margin of 47.4%.

She goes on to say, “Apple can continue to deliver these beats on expectations by putting a major emphasis on its supply chain and, for the last couple of product releases, by keeping its form factors consistent so that it can continue to improve manufacturing efficiencies.”

In early April, some analysts projected the stock could surge to $1,000 by 2014.

Think about it. Who doesn’t want a stock forecasted to get to a $1,000 a share that right now is trading in the $590 range?

In fact, there are a lot of “sexy” equities in the market like Apple, MasterCard (NYSE: MA), Priceline (Nasdaq: PCLN) and Google (Nasdaq: GOOG) that are priced in the hundreds. You want to get in on the growth, but the average investor is priced out, regardless of attractive fundamentals.

The Bull Call Spread

Options strategies can allow you to get in the game without leveraging the farm. Sometimes the mere mention of options trading can put the fear of God into the average investor – and to be fair, there is a ton of risk if you don’t know what you’re doing.

But I think this specific strategy, and an example, can show how this can be done fairly easily. It’s called a “bull call spread.”

The bull call spread, or vertical call spread, is when you buy call options at a specific strike price while also selling the same number of calls of the same asset and expiration date at a higher strike.

As the name implies, a bull call spread is used when you believe a security is going up. The most you can gain is the difference between the strike prices of the long and short options, less the net cost of options.

In the March 26 issue of Barron’s, Striking Price columnist Steven M. Sears gives a pretty good example of how this works:

With Apple at $601.31, investors can buy Apple’s January $600 call that expires in 2013, and sell Apple’s January $700 call that also expires in 2013. The position costs $37.50, and lets investors benefit if Apple’s stock hits $700 by next January.

If Apple’s stock advances as expected, investors who used the Apple call-spread strategy buying the January $600 call and selling the January $700 call-will make a 168% return on their investment.

Of course you get limited return if the stock goes above $700 because you don’t own it.

But keep in mind that one of the great things about this spread trade is that the expense you incur by purchasing the at-the-money call option is offset by the income you receive from writing the out-of-the-money call option – and this why your net expense for the trade is much smaller.

Good Investing,

Jason Jenkins

Article by Investment U

Video courtesy of ForexCT – A leading Australian forex broker, liscensed by the Australian Securities & Investments Commission, offers the MetaTrader4 and PROfit Platform to retail traders. Other services include Segregated Accounts, Trading workshops, Tutorials, and Commodities trading.

Source: ForexYard

The euro continued to tumble vs. its main currency rivals yesterday, as traders remained cautious about investing in riskier assets due to political uncertainty in the euro-zone. The EUR/USD fell to a fresh three-month low during the afternoon session at 1.2929. Turning to today, traders should be prepared for market volatility, as significant indicators from the UK and US are scheduled to be released. Attention should be given to the UK MPC Rate Statement, followed by the US Trade Balance figure and a speech from Fed Chairman Bernanke. Should any of the news lead to additional pessimism in the global economic recovery, riskier currencies like the euro may fall further.

Economic News

USD – Safe Haven Dollar Extends Gains amid Euro-Zone Worries

A lack of news events yesterday helped the dollar extend its recent bullish trend, as the political uncertainty in the euro-zone following recent elections in France and Greece caused investors to keep their funds with safe haven assets. The AUD/USD dropped close to 70 pips over the course of the day, reaching as low as 1.0031. The GBP/USD fell close to 90 pips, reaching as low as 1.6066 before rebounding slightly to 1.6090. That being said, the news was not all positive for the dollar. The USD/JPY continued to fall throughout the day, reaching as low 79.42.

Turning to today, dollar traders will want to pay attention to a batch of US news scheduled to be released over the course of the day. At 12:30 GMT, the latest Trade Balance and Unemployment Claims figures will be announced. With both forecasted to come in worse than their previous readings, the dollar may continue to slide against the JPY. At 13:30, all eyes will be on a speech from Fed Chairman Bernanke. Any indications in the speech that the Fed will initiate a new round of quantitative easing in the near future could lead to additional losses for the dollar against other safe-haven currencies.

EUR – Risk Aversion Leads to Additional Euro Losses

The euro extended its downward trend yesterday, as fears of additional turmoil in the euro-zone prevented investors from shifting their funds to riskier assets. In addition to the EUR/USD, which dropped to a fresh three-month low during the European session, the common currency also tumbled against the JPY and GBP. The EUR/JPY fell close to 100 pips, reaching as low as 102.89 during afternoon trading. After seeing moderate gains earlier in the day, the EUR/GBP once again turned bearish during the afternoon and fell below the 0.8030 level.

Turning to today, euro traders will want to pay attention to the French Industrial Production figure, scheduled for 06:45 GMT, followed by the ECB Monthly Bulletin at 08:00. Analysts are forecasting a steep drop in the French production figure over last month. If true, it could result in further risk aversion in the marketplace which may lead to additional euro losses during mid-day trading. Later in the day, a speech from Fed Chairman Bernanke may generate volatility for the EUR/USD pair. Any signs that the Fed may initiate a new round of quantitative easing could help the euro recover some of its recent losses against the greenback.

Gold – Weakened Demand Leads to Drop in Price of Gold

The price of gold fell throughout the day yesterday, as risk aversion in the marketplace caused investors to turn bearish toward the precious metal. Additionally, a weak euro made gold more expensive for international buyers which in turn led to a drop in price. Gold declined over $15 an ounce, reaching as low as 1580.20 during European trading.

Today, analysts are warning that gold still has more room to fall as long as investors remain worried regarding euro-zone economic growth prospects. That being said traders will want to pay attention to several US indicators set to be released during the afternoon session. Should any of them cause the USD to reverse its current bullish trend, gold may be able to recoup some of its recent losses.

Crude Oil – Oil Remains Bearish Due to High US Inventories

The price of crude oil extended its bearish run yesterday, as near record high stockpiles of the commodity in the US signaled weakened demand in the world’s largest oil consuming country. The price of crude dropped close to $2 a barrel over the course of European trading, reaching as low as $95.16.

Turning to today, traders will want to pay attention to a batch of US news. Should any of it come in below expectations, the dollar could reverse its current bullish trend, in which case the price of oil may be able to rebound during the afternoon session. That being said, with investors preoccupied with the political situation in Europe, any impact the US news has may be limited.

Technical News

EUR/USD

A bullish cross on the daily chart’s Slow Stochastic indicates that this pair could see upward movement in the near future. This theory is supported by the Williams Percent Range on the same chart, which has dropped into oversold territory. Going long may be a wise choice for this pair going into the rest of the week.

GBP/USD

The daily chart’s Bollinger Bands are beginning to narrow, indicating that this pair could see a price shift in the near future. Furthermore, a bearish cross on the weekly chart’s Slow Stochastic indicates that this pair could see downward movement in the coming days. This may be a good time to open short positions ahead of a possible downward breach.

USD/JPY

Long term technical indicators are providing mixed signals for this pair. While the daily chart’s Williams Percent Range is in oversold territory, meaning that upward movement could occur, the weekly chart’s MACD/OsMA has formed a bearish cross. Taking a wait and see approach may be the wise choice for this pair.

USD/CHF

A bearish cross on the daily chart’s Slow Stochastic indicates that this pair could see downward movement in the near future. This theory is supported by the Williams Percent Range on the weekly chart, which has just crossed over into overbought territory. Going short may be the wise choice for this pair.

The Wild Card

CAD/JPY

The Williams Percent Range on the daily chart has dropped into oversold territory, indicating that this pair may see an upward correction. Additionally, the Relative Strength Index (RSI) on the same chart is very close to dropping below the 30 level. Forex traders will want to monitor the RSI. If it drops any further, it may be a good time to open long positions.

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

Source: ForexYard

The euro remained near a three-month low against the US dollar and JPY in overnight trading as investors await news regarding a possible new Greek election in the next few weeks.

Main News for Today

UK Manufacturing Production- 08:30 GMT
• Forecasted to come in at 0.5%, well above last month’s -1.0%
• If true, the GBP may see gains vs. safe-haven currencies

UK Official Bank Rate/MPC Rate Statement- 11:00 GMT
• MPC isn’t expected to adjust British interest rates
• The MPC Statement could offer clues as to a possible new round of quantitative easing
• Any mention of quantitative easing could turn the pound bearish

US Trade Balance- 12:30 GMT
• Analysts are predicting the US trade deficit grew to -49.8B
• If true, the dollar may see additional losses against the JPY

US Unemployment Claims
• Unemployment Claims forecasted to have increased to 371K
• Anything above 371K could result in dollar losses during afternoon trading

US Fed Chairman Bernanke Speaks- 13:30 GMT
• Following last week’s disappointing Non-Farm Payrolls figure, investors will be closely watching today’s speech
• Any mention of a new round of quantitative easing in the US could result in heavy dollar losses against the yen

Read more forex news on our forex blog

Forex Market Analysis provided by ForexYard.

© 2006 by FxYard Ltd

Disclaimer: Trading Foreign Exchange carries a high level of risk and may not be suitable for all investors. There is a possibility that you could sustain a loss of all of your investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with Foreign Exchange trading.

By MoneyMorning.com.au

In a week where commodity prices have hit the skids, it seems crazy to ask if a commodity is safer than cash.

In just over a week…

Oil has fallen 8%.

Copper is down 5.6%.

And gold priced in US dollars is down 3.9%.

Yet those falls are nothing compared to the 10.5% cut many savers have suffered over the past six months. And odds are that, if you’re not careful, the news is about to get worse…

Savers Take a Pay Cut

Let us explain. Eight months ago, we took out a six-month term deposit using spare cash from our retirement fund. The interest rate was 6%.

Two months ago, we rolled it over for another six months. This time we only got 5.8%. Today, if we wanted to take out a six-month term deposit with the same institution, we’d only get 5.5%.

That’s an 8.3% ‘pay cut’ for savers.

And goodness only knows what rate we’ll get when we roll the cash over again in four months. Our guess is 5.2%…if we’re lucky.

It’s even worse in our online savings account. Last September we earned 4.75% on our savings. Today, it’s only 4.25%.

And no doubt that rate’s heading lower too.

That’s a 10.5% ‘pay cut’ for savers.

Anyway, you probably don’t care what interest rate we get. The only reason we’re telling you this is to show you a real-life example of how governments and central banks are robbing savers blind.

Look at your own savings accounts and you’ll see a similar story.

And the sad truth is it’s set to get worse.

Lowest Rates in 60 Years

As The Age reported yesterday:

‘Even as stresses swept through Europe’s credit markets overnight, Australian 10-year bond yields fell to record lows. They were last quoted at $120.43, implying a yield of 3.36 per cent, down five basis points overnight, to levels not seen since the 1950s.’

This morning the yield is even lower. It’s just 3.33%. And as the chart below shows, yields almost across the entire line from short-term to long-term bonds have slumped since 2009…

That’s great news if you bought bonds three years ago (bond prices rise as yields fall).

But it’s not so great if you’re an ordinary investor who doesn’t buy bonds. Most ordinary investors have cash in the bank. And thanks to the manipulation of interest rates, savers are seeing their returns fall…and that’s forcing you to take more risks with your money.

Or is it?

In a way, yes.

But in another way, is it possible that investing in something that mainstream analysts claim is a risky asset could actually be safer than money in the bank? We’ll let you decide. But get this…

Gold Beats Cash

On 27 April last year our old sparring partner Michael Pascoe at The Age wrote:

‘A quick check of a gold chart site will show the yellow metal trading around 1,400 Australian dollars an ounce – which is what it was worth in the middle of last May and well off the $A1,546 peak of early 2009.’

Today, Aussie dollar gold is $1,590 an ounce.

So, in one year (from the Pascoe article) the price of Aussie dollar gold has gained 13.6% – that’s better than money in the bank.

Of course, you’re right if you say we’ve cherry-picked dates. Just four months after the Pascoe article, Aussie dollar gold hit $1,806.

So if you bought at that sky-high price then you’re well under water on your gold investment. But things were different back then. Many saw Australia as a miracle economy, China was booming and the Aussie dollar was soaring.

Today? The miracle is over, China is stuttering and the Aussie dollar is back on par with the U.S. dollar.

Hence, the Reserve Bank of Australia has cut interest rates to prevent an Aussie recession.

So expect lower interest rates for some time. And lower interest rates mean that you will need to take more risk with your savings. 5.5% on a term deposit looks good today, but don’t assume it will last long.

When Money Printing Makes a Comeback
Savers Can Suffer

You only have to look at the latest financial reports from the major banks. This morning National Australia Bank Ltd [ASX: NAB] reported a 15.5% drop in first half profit compared to last year.

And just as importantly, NAB’s interest margins (the difference between the interest it earns from borrowers and the interest it pays to savers) slipped too.

That tells you the banks have two choices: either raise interest rates for borrowers or cut interest rates to savers.

With the Aussie housing market falling off a cliff (two prime-position St Kilda apartments we walk past every day have been on the market over six months) banks won’t want to risk a complete collapse by jacking up mortgage rates…so the only option is to stick it to savers.

So, what’s a saver to do?

The important thing to remember is that the global economy is on the edge of an almighty cliff. Anything, at any point in time, could push it over the edge.

If (when) that happens, traditional safe investments such as cash may not be that safe. And the kind of investments you’ll have been forced into to chase higher returns will take a walloping (shares and bonds).

Even if shares recover on the back of more central bank intervention, the ride in between will be very volatile.

And according to Bloomberg, you may not have to wait long for central banks to act again:

‘Pacific Investment Management Co.’s Bill Gross and Jan Hatzius at Goldman Sachs Group Inc. say investors should prepare for additional bond purchases by the Federal Reserve to combat a slowing U.S. economy.’

More money printing should be good news for the gold price…but bad news for cash savers.

So in short, our long-term advice remains the same. Buy gold for security and wealth protection against central bank and government intervention.

Yes, the gold price can be just as volatile as shares (and bank interest rates), but at least it’s a tangible asset.

We’re not saying you should convert all your cash into gold, but we are saying is that cash in the bank isn’t as safe as it used to be.

Cheers,
Kris.

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